US residential solar financing group Sunlight Financial is to list on the New York stock exchange after forging a partnership with special purpose acquisition company (SPAC) Spartan.
Spartan, backed by funds managed by an affiliate of Apollo Global Management, has combined with Sunlight Financial in a deal that values the combined entity at roughly US$1.3 billion.
Geoffrey Strong, the chief executive of Spartan and senior partner and co-head of infrastructure and natural resources at Apollo, told investors today (26 January) that Sunlight appealed as it sits in “the most attractive and fastest growing segment” of the solar sector, “really getting into the sweet spot of the market.” The deal is expected to close in the second quarter of 2021.
Sunlight Financial offers its partners a range of solar loan products for residential properties. The company’s online platform is accessible to partners directly, or through a quick technical integration.
Early Facebook executive Chamath Palihapitiya, hedge fund sponsor Coatue, funds and accounts managed by BlackRock, and investment managers Franklin Templeton and Neuberger Berman will lead a US$250 million investment in the company through Private Investment in Public Equity (PIPE) at a price of US$10 per share.
Palihapitiya tweeted on 25 January that he was “excited to partner” with Phillippe Laffont, founder of Coatue to lead the PIPE in Sunlight, which he called “a leader in the residential solar boom”.
My latest climate investment: $SPRQ
Excited to partner with Apollo and @plaffont to lead the PIPE in Sunlight who is a leader in the residential solar boom.
2023E GMV $4.27B
2023E EBITDA margins of 56%
EV today is $1.26B
0.29x 2023E GMV
11x 2023E EBITDA pic.twitter.com/mj17rS3Dgf
— Chamath Palihapitiya (@chamath) January 25, 2021
The PIPE purchase will give the institutional investors a 19% share in the newly listed entity. Spartan stakeholders will have roughly 26%, while existing investors, which include Tiger Infrastructure Partners, FTV Capital, and founder Hudson Sustainable Group, will retain approximately 50% of the combined company.
Matt Potere, chief executive officer of Sunlight, said the listing will help the company to accelerate its earnings and revenue growth. In a statement announcing the combination, Sunlight said it has financed upwards of US$3.5 billion of loans, has and arranged financing for 10,000 residential solar systems with a combined capacity of 500MW to date. Sunlight’s current management team will stay on to lead the business when it goes public.
“While the solar market is still nascent,” Potere told investors, “consumers convert to solar for sound economic reasons…the cost of utility power increases 2-3% per year which is making solar cheaper on a relative basis”
Potere added that there has been “substantial growth” in the US residential solar market in the past decade, “and Sunlight plays in the fastest growth segment”, noting that two thirds of residential solar installations in the US are financed through a loan.
“We are proud to have built a profitable, capital-light company that generates significant free cash flow and is poised for strong, sustainable growth,” Potere said in a statement.
Spartan CEO Strong added that the Sunlight business has “substantial operating leverage, which well prepares Sunlight to grow and profit for years to come.”
Leading figures in the US residential solar market have said their balance sheets are already starting to recover from the affects of COVID-19 restrictions in the country. Portere told panellists at a virtual webinar last October that the loan provider’s third quarter sales growth was 50% higher in 2020 compared to the same period last year, rebounding from a Q2 hit by sales-in-place orders.